Hammond ‘would gain £200m’ by cutting whisky duty

Cutting tax on Scotch Whisky in the Budget will give Chancellor Philip Hammond an extra £200 million to spend over the next five years, according to new analysis of the UK spirits market.

The revenue modelling by independent economics consultants shows Philip Hammond could generate this windfall for the Treasury by reversing the 3.9% hike in excise duty in his March Budget.

The Scotch Whisky Association says a reduction in the 80% tax on an average-priced bottle of Scotch would also boost the industry and help consumers.

The research shows a cut of this size would generate an extra £42m in tax revenues next year alone – rising to a total of £197m by the end of the Parliament in 2022-23.

Even a more modest 2% cut in duty would bring in an extra £22m for the Treasury next year, and £105m over the next five years.

In contrast, the analysis shows that sticking with inflation-linked duty increases every year will see revenues fall by £290m by 2022-23.

The new independent modelling has been presented to the Treasury as Mr Hammond prepares to unveil his Budget on November 22.

The findings mirror the experience of the duty cut in 2015, which gave a £124m boost to the Treasury. A freeze in 2016 also saw revenues increase by £229m. HMRC figures show spirits revenue fell by more than 7% in the first quarter after the Chancellor increased duty in March.

The April 2017 increase took the level of tax on a bottle of Scotch up to a staggering and unprecedented 80%. Of an average bottle sold at £12.77, more than £10 goes straight to the Treasury.

Karen Betts (right), chief executive of the SWA, said: “These figures show that cutting spirits duty in the Budget will be good for the Treasury, good for the UK economy and good for our world-famous Scotch Whisky industry.

“The Chancellor has the chance both to back a leading UK manufacturing industry which supports 40,000 jobs and to generate more money for public services.

“We are urging him to Drop the Dram Duty and show how much the Government believes in home-grown global success stories like Scotch.”

The findings come after a string of MPs used a Westminster Hall debate last month to demand fairer taxation for Scotch – and have vowed to keep up the pressure.

Kirstine Hair, Conservative MP for Angus, said: “I am fully aware of the importance of the whisky industry across Angus, Scotland and the UK.

“There is a perception that this is only a Scotland-only issue, when virtually every one of the UK’s 650 constituencies benefit in some way, with a large proportion involved directly in supply.

“In addition to raising this issue with Treasury Ministers in debates, I have been lobbying to ensure that spirit duty does not penalise manufacturers and the jobs they create.”